- The answer looks completely different depending on whether the deal is a share sale or an asset sale.
- Older discussions of Ontario business sales sometimes reference "bulk sales compliance" — a process that once required notifying creditors before a bulk transfer of business assets.
Every operating business has unpaid bills sitting somewhere in its books on any given day — a supplier invoice not yet due, a utility bill for last month's usage, wages accrued but not yet paid out. When the business changes hands, those bills don't disappear. Someone has to be responsible for them, and getting that wrong is one of the more common ways a business sale turns into a post-closing argument.
Who pays what comes down to two things: the deal structure, and what the purchase agreement specifically says about liabilities.
Assumed vs. Excluded Payables: The Starting Point
The answer looks completely different depending on whether the deal is a share sale or an asset sale.
- Share sale. The corporation itself is what's being bought. All of its liabilities — including every outstanding payable, known or unknown — come with it, because the buyer is acquiring the same legal entity that owes the money. This is one of the central reasons buyers push hard on due diligence, representations and warranties, and indemnities in a share deal.
- Asset sale. The buyer and seller specifically identify which liabilities, if any, the buyer is assuming. Anything not expressly assumed generally stays behind with the selling entity. This gives an asset-sale buyer far more control over which bills follow the business — but only if the agreement's assumed/excluded liability language is done carefully.
Typical Categories and How They're Often Handled
| Category | Common asset-sale treatment |
|---|---|
| Trade payables to suppliers (pre-closing) | Frequently excluded — stays with the seller to pay off |
| Accrued but unpaid wages/vacation pay | Often specifically addressed, particularly where employees are continuing with the buyer |
| Utilities and recurring service bills straddling the closing date | Commonly prorated between buyer and seller based on usage before/after closing |
| Outstanding taxes owed by the seller | Almost always excluded from what the buyer assumes, given the risk of successor liability concerns |
| Equipment leases or financing tied to purchased assets | Sometimes assumed if the buyer is keeping the underlying asset and the lender/lessor consents |
This table reflects common patterns, not a legal default — every purchase agreement has to state its own list of assumed and excluded liabilities, and the specific wording controls over any general assumption either side brings into the negotiation.
There Is No "Bulk Sales" Notice Requirement Anymore
Older discussions of Ontario business sales sometimes reference "bulk sales compliance" — a process that once required notifying creditors before a bulk transfer of business assets. Ontario's Bulk Sales Act was repealed in 2017, and there is no equivalent statutory creditor-notice regime in its place today. Don't rely on outdated checklists or precedents that still reference bulk sales requirements as a live legal step.
That doesn't mean creditors are unprotected, or that a buyer can ignore the seller's unpaid bills. It just means the protection now comes entirely from contract and diligence rather than a government filing:
- Due diligence to identify existing payables and any patterns of late payment or disputed invoices before signing.
- Clear assumed/excluded liability language in the purchase agreement itself.
- Representations and warranties from the seller about the state of its payables and liabilities as of closing.
- Indemnities allowing the buyer to recover if an excluded liability nonetheless surfaces and causes the buyer a loss.
- Holdbacks or escrow, giving the buyer a pool of funds to draw against if an undisclosed liability turns up after closing.
The Working Capital Angle
If the deal includes a working capital adjustment, accounts payable are frequently one of the line items measured as part of that calculation — a business with an unusually high level of unpaid bills at closing may reduce the amount the buyer ultimately pays, even apart from whatever the assumed/excluded liability clause says. The two concepts work together but are not the same: assumed/excluded liability language decides who is legally on the hook for a given bill, while a working capital adjustment is a pricing mechanism that reflects the overall financial position of the business at closing.
Closing-Day Checklist for Accounts Payable
- [ ] A current accounts payable listing has been reviewed as part of due diligence
- [ ] The purchase agreement clearly states which liabilities are assumed and which are excluded
- [ ] Recurring bills (utilities, rent, subscriptions) straddling the closing date have an agreed proration method
- [ ] Accrued employee amounts (wages, vacation pay) are specifically addressed, especially where employees are continuing
- [ ] Any known disputed invoices or supplier disputes have been disclosed and dealt with
- [ ] Indemnity and holdback provisions are in place to cover undisclosed liabilities that may surface later
Frequently asked questions
Does a buyer automatically inherit the seller's unpaid bills in an asset sale?
No — only the liabilities the purchase agreement specifically says the buyer is assuming. Everything else generally stays with the seller, though the agreement's exact wording is what actually controls, not a general assumption either way.
Is it different in a share sale?
Yes, significantly. Because the corporation itself is being purchased, all of its liabilities — including payables not disclosed or discovered before closing — legally remain with that same corporation, now under the buyer's ownership. This is why representations, warranties, and indemnities matter even more in share deals.
What happens if an old, undisclosed bill shows up after closing?
This depends on how the liability was categorized in the purchase agreement and what indemnity protections exist. An excluded liability that surfaces after closing may still be enforceable against the buyer by the creditor directly, even if the seller remains contractually responsible to reimburse the buyer — which is why indemnity and holdback provisions matter in practice, not just on paper.
Do I still need to worry about "bulk sales" notices to creditors?
No — Ontario's Bulk Sales Act was repealed in 2017, and there is no current statutory bulk-sales notice requirement. Creditor protection today comes from due diligence, purchase agreement terms, and indemnities instead.
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